The two models of international trade with developed factor markets -- Heckscher-Ohlin and Specific Factors -- both suffer significant defects. For example, their predictions about the patterns of domestic production and international trade are for the most part either indeterminate or uselessly complex. The problem with these models is that the supply of factors to an industry is either perfectly elastic or perfectly inelastic. Using a model in which heterogeneous workers sort across industries we eliminate this problem. The result is a multi-good model with sharp predictions about (1) the domestic pattern of production, (2) North-North and North-South trade, (3) the demand for protection, (4) the determinants of domestic income distribution, and (5) the effect of trade on economic development.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
10959.
Length: Date of creation: Dec 2004 Date of revision: Handle: RePEc:nbr:nberwo:10959
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Find related papers by JEL classification: F11 - International Economics - - Trade - - - Neoclassical Models of Trade F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations F16 - International Economics - - Trade - - - Trade and Labor Market Interactions J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Jacobson, Louis S & LaLonde, Robert J & Sullivan, Daniel G, 1993.
"Earnings Losses of Displaced Workers,"
American Economic Review,
American Economic Association, vol. 83(4), pages 685-709, September.
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